China, already beset by a worrying real estate bubble, is now grappling with surging prices for a dinner table staple closer to home – garlic.China is the world’s largest producer of garlic. They are in the middle of a boom. Wholesale prices rocket as much as 15-fold since March in large cities such as Beijing, forced up in part by a combination of reduced acreage being planted by local farmers because of the recession – and, far more probably, a belief that garlic can keeping away swine flu.
Schools have been hoarding garlic for pupils to eat because of its reputed properties in warding off swine flu. The China Daily has reported that a high school in Hangzhou in eastern China, bought 200 kg of garlic and made students eat it at lunch to keep healthy.
Jerry Lou, Morgan Stanley China strategist, who has been gathering intelligence from the country’s biggest wholesalers, said speculators, financed by the abundant liquidity sloshing around the country, had moved into the relatively small market and manipulated prices.
He said, “You need a warehouse, a lot of cash, and a few trucks. That’s how it works. Basically, what you do is try to arrest as much supply as possible then you bid up the price. Moving garlic from one warehouse to the other, you make millions of dollars.”
The Washington Post reports that China produces about three-quarters of the world’s garlic. Argentina and Spain are the next largest exporters.